Net Gains: A Guide to Online-Only Banks

Source: Thinkstock

Source: Thinkstock

Most banks now offer online services for their customers. But other banks have taken that to the extreme, and now only exist on the Internet. For people who don’t need a brick-and-mortar location, this could be a great banking option. There are some definite perks that come along with online banks, but be wary — there are also some conveniences lost along the way, and online banking isn’t for everyone. Considering changing to an online-only bank? Read these tips, along with some recommended banks, before making the switch.

The benefits

Online-only banks don’t have the same expenses that brick-and-mortar branches do, so they can often offer lower fees and higher interest rates. And, many online banks will let you use any ATM for free – you can often see ATM rebates show up in your checking account each month.

“Customers willing to restrict their banking to an Internet-only experience earn certain perks. For example, interest paid on deposits at Internet-only banks typically is higher than it is in accounts offered by more traditional banks,” writes Bankrate.

They also give you instant access to your money 24/7, making it easy to stay up-to-date on what’s going on with your account. It’s easy to make transfers, and many online-only banks typically have customer service representatives available to chat with you any time of the day.

The cons

Depending on the bank (this isn’t the case for all of them), you may struggle with finding a limited ATM network. Do your homework on what the different banks offer for ATMs before committing to one. Remember, you can no longer go to a physical bank, so you’ll want to have easy access to ATMs.

Check to see if the Internet-only bank you’re looking at offers home or business loans, Bankrate writes. If it’s something you don’t have any interest in, it shouldn’t be a deal-breaker. But if it is something you’ll want as an option someday, make sure the bank can provide it.

Do you expect personal service? Again, because there isn’t a physical bank for you to visit, you’re not going to have that face-to-face interaction with a loan officer or teller. If that’s important to you, an online bank is not for you.

Depositing cash could be another con to consider when switching to an online-only bank. The online banks should all have apps that allow you to deposit your checks. However, there’s no way to deposit cash if there isn’t a physical bank attached to it – something to keep in mind if you’re making a lot of cash deposits.

Safety measures

Before picking an online-only bank, it’s important to take a few security precautions. First, make sure the bank you’re looking at has a note on its website saying “FDIC-insured” or “Member FDIC,” and verify this information on the FDIC’s website.

Pick a tough password. This isn’t the time to use “password”or “1234”for your login password. You want it to be extremely tough for anyone to be able to guess.

A few online-only banks to check out:

Ally Bank: It’s a subsidiary of Ally Financial, and charges no monthly fees on its Interest Checking account. You can open an account with as little as $1, and there’s no minimum-balance requirement. Ally rebates all fees at any ATM nationwide, writes Kiplinger. Ally also pays a 0.25 percent interest on all checking balances up to $15,000. Its easy-to-use online tool will quickly calculate your future interest earnings.

Capital One 360 – 360 Checking: “Capital One’s new checking account is noteworthy for its low or nonexistent fees across the board. Besides no monthly fee, there are hardly any others that customers will encounter while using their account (stop payments being one of the only exceptions),” writes Nerd Wallet. You can earn 0.20 percent interest on balances up to $50,000, use your computer or a mobile app to scan and deposit checks, and use your card abroad without incurring foreign transaction fees.

FNBO Direct – Interest Checking: FNBO Direct, an online division of First National Bank of Omaha, has a great online checking account that offers convenient bill pay options. You have the option to make quick payments through Popmoney, and you can schedule automatic payments for recurring bills. According to Nerd Wallet, you’ll get a a 0.65 percent interest rate –far more than you could earn with most saving accounts.

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